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UK reaches “basic agreement” on no-deal Brexit tariffs, tough choices remain

Reuters LONDON | Updated on March 06, 2019 Published on March 06, 2019

Liam Fox, Trade Minister, United Kingdom (file photo)   -  File photo

Britain's government has reached a general agreement on import tariffs if it leaves the European Union without a deal, Trade Minister Liam Fox said on Wednesday, but the business minister warned that tough choices remained.

Broadcaster Sky News reported on Tuesday that the government was planning to slash tariffs on 80-90 per cent of goods if it left with no deal, which would benefit consumers but damage the competitiveness of many British factories and farms.

Speaking to lawmakers on Wednesday, Fox said senior ministers had reached an outline agreement but that it was too soon to make details public. “It is always possible that there could be further changes, but there has been a basic agreement,” he told a parliamentary committee.

Fox added that no decision had been reached on whether parliament should be given any details of the tariffs before it has to vote again on Prime Minister Theresa May's preferred Brexit deal on March 12.

Britain currently has tariff-free access to EU markets, and benefits from EU trade deals with other countries. But its exports will automatically face EU tariffs if it crashes out of the bloc on March 29 without transition arrangements.

‘Difficult set of choices’

Businesses want to know if Britain, the world's fifth largest economy, will slap reciprocal tariffs on imports from the EU. If not, tariffs would have to be lifted on imported goods from most other countries under World Trade Organisation rules. “There is a very difficult set of choices that have to be made if we were to leave without a deal,” Business Minister Greg Clark told the BBC earlier on Wednesday.

“Either you are making things more expensive that previously came in tariff-free from the EU, or, in some cases...undermine the industry,” Clark said, citing the need for tariffs on what he described as unfairly cheap Chinese ceramics exports.

Unilaterally scrapping tariffs would also reduce Britain's leverage to encourage other countries to lower tariffs on British exports, he added.

Ross Denton, a trade lawyer at law firm Baker McKenzie, said scrapping import tariffs would be “devastating” for British farmers. Warwick Business School professor Nigel Driffield said the plans looked rushed, with no detailed cost-benefit analysis.

Protecting sensitive segments

Sky News said senior ministers had privately agreed to scrap tariffs on almost all goods other than the most sensitive areas such as cars, beef, lamb and dairy products.

Clark said lawmakers would only be told about proposed tariffs if a majority vote next week in favour of leaving the EU without a deal, though Fox said he would prefer to inform lawmakers before such a vote. “Work is continuing on developing and finalising those tariff schedules but they will be published...once we knew that we were leaving without a deal on March 29,” Clark said.

The government's priority is to ensure that on Tuesday lawmakers supported an amended version of a Brexit withdrawal plan which they overwhelmingly rejected on January 15, he added.

Sky said that Clark had lobbied colleagues in favour of tariffs on car imports to protect Britain's automotive industry, while environment and farming minister Michael Gove had made the case for agricultural tariffs.

Brexit supporters like Fox view regaining the ability to set an independent trade policy as one of the main advantages of leaving the EU, arguing that Britain will have more success negotiating trade deals with other regions on its own.

Published on March 06, 2019
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